Are we over-doing the pessimism thing?
Earlier this year – on St Patrick’s Day (March 17) to be precise – the American newspaper USA Today published a poll in which 76 per cent of those asked declared their belief that the United States was in a recession. Overall, the poll found the population of the United States deeply pessimistic about their economic future.
The newspaper also quoted David Wyss, chief economist at Standard & Poor, who said that ‘recessions are almost always crises of confidence, and that’s what we’re having right now’. And Barack Obama, then just one of two frontrunners for the Democratic nomination for the Presidency, declared that it was necessary to ‘restore the public’s confidence in the market’.
Assessing the role of confidence (or lack of it) in a recession is tricky. Does a failure of confidence by the general public contribute to or even cause a recession, or is it just a symptom or a consequence of one? When we broadcast our despair at economic developments, are we just commenting or are we engaging in self-fulfilling prophesies? John Maynard Keynes was of the view that pessimism could cause recessions, and other economists have voiced similar views.
It is hard to disentangle all the elements of the economic tornado that has spun through the world in 2008, but it is unlikely that it has been getting its velocity entirely from pessimistic consumers and citizens, or even pessimistic businesspeople. We know that it all began with the credit crunch, and we know that this in turn was stimulated by some very questionable practices in the global banking community. But on the other hand, is that all? Probably not. Other factors have been at work, and a key one has been the decline – collapse, almost – of confidence and the growth of pessimism.
In Ireland pessimism, particularly of the rather irritating ‘I-told-you-so’ variety, is rife and has been for some months. It can be heard from the media, from the Oireachtas, and from the man propping up the bar. We are collectively frightening each other into surrendering our belief in the future, and because we believe what we are telling each other, our actions in the shops and at work reflect that and serve to exacerbate the problem we face. Over the past week or so, I have lost count of the number of times I have heard or over-heard conversations about the sheer hopelessness of our situation and the certainty of further disaster.
It would be silly to deny that we have a problem, in Ireland and indeed in the world. But maybe the time is right to stop complaining about it and to get on with doing something about it. Every recession has opportunities also, and Ireland may be well placed to exploit some of these. So let us get into planning and maybe give all the moaning a rest. Let us feel, express and therefore restore some confidence. Let us be imaginative and entrepreneurial, and let us work together.